Capital Gains Tax Opponents Received Taxpayer-Funded Aid

By Shauna Sowersby

Founders and CEOs from more than 120 Washington businesses that are members of the Washington Technology Industry Association recently sent a letter to state senators encouraging a “no” vote on SB 5096, a bill that would impose a 7 percent tax on the sale of long-term capital assets such as stocks, bonds and mutual funds valued at over $250,000.

While rejecting ideas for raising progressive revenue on a state level, at least 58 of the companies whose leaders signed the letter received taxpayer-funded benefits through the Federal Paycheck Protection Program.

Public records reveal that at least 58 of those companies who signed the letter received nearly $34 million in funding from PPP loans, a program established by the federal CARES Act meant to help small businesses stay afloat during the pandemic.

Public records reveal that companies such as ExtraHop Networks, FlyHomes, Widenet, and Neal Analytics received more than $1 million each from the program. Software publisher ExtraHop, which is headquartered in Seattle, received nearly $10 million in assistance, for example. ExtraHop did not respond to an email seeking comment. Several other companies whose leaders signed the anti-capital gains tax letter received over $1 million in loans, although many recipients were under that threshold. 

Another corporation that benefited from the federal loans also held a public fundraiser that raised $7.6 million. AstrumU, a Kirkland business that specializes in custom computer programming services, received nearly $600,000 from the PPP prior to the multi-million dollar fundraiser. 

Businesses that use their PPP loans as outlined by the Small Business Administration can have their loans forgiven.

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The WTIA argued in their letter to the senate that “a capital gains tax would penalize founders and their employees during an already unprecedented period.” Additionally, they added, “taxing those gains penalizes employees and encourages founders to form their companies in other states, or to relocate to states that do not have a capital gains tax.”

Only nine states including Washington do not have a capital gains tax.

Political think tank Civic Ventures argued in a response letter to the WTIA that their argument is “absurd,” stating that “California has the highest capital gains tax rate of any state in the country, vastly higher than what SB 5096 proposes, and has more tech start-ups than any other state.” (Full disclosure: Civic Ventures is one of PubliCola’s financial supporters).

Sponsored by Sen. June Robinson (D-38, Everett), the first $350 million in revenue raised by the tax would be put into the Education Legacy Trust Account to fund education in the state, while the remainder would be added to a new Taxpayer Relief Account. The highly debated bill is currently awaiting a floor vote in the Senate.